Anyone have some perspective on the SnapTrack purchase? Is it reasonable to expect a $2 premium per handset? According to Trimble (which has taken a hit since the acquisition on fears of becoming QCOM's lunch), handset mfr's only want to spend a dime or so for GPS capability, and Trimble is "way ahead". I have no idea whether any of this stuff holds water. From TMF>
Magic 25
Feb 14, 2000
Trimble CFO Zimmerman Moves On
Research Analyst: Alex Yakirevich (2/14/00)
Trimble Navigation Ltd. (NASDAQ:TRMB - news) announced on February 11 that Mary Ellen Genovese, vice president of finance, was appointed to the position of acting chief financial officer, replacing John Zimmerman, who will be leaving the company to pursue opportunities in the Internet business.
Apparently, investors did not like the news, driving the stock down to as low as $18.50 before it recovered to close Friday at $19.63. We think the sell-off is overdone.
We are not concerned with the latest changes in management. John Zimmerman fulfilled his task of restoring Trimble's financial health and establishing better communication between the company and the Street. In addition, Mary Ellen Genovese is an experienced officer who is no stranger to the job and who has taken on CFO duties on several occasions in the past.
Zimmerman will act as a consultant to Trimble for the next six months, providing his valuable advice on intellectual property and business development issues, which bodes well for Trimble's ongoing efforts to enforce its patent portfolio and to capture new business.
Turning to Trimble's operations, in our recent conversation with Genovese, we learned that the company remains on target with respect to addressing the problem of component shortage (discussed in our January 28 update) by the end of the first quarter.
Meanwhile, Trimble continues to enjoy a strong business environment. Even lagging markets, such as agriculture, construction and mining, are showing signs of improvement. Genovese was particularly upbeat about the outlook for the agricultural sector. As a result of recent efforts by the U.S. government to help the recovery, the agricultural industry will receive a total of $8 billion in tax incentives this year. The funds have already been allocated, and farmers were to submit all required paperwork by the end of January.
Genovese says this money will probably be re-invested into technology that will enable farmers to cut costs and to improve yields. Trimble is standing ready to address this demand with a broad line of GPS-driven precision agriculture products.
One of the exciting products in the lineup is AgGPS Autopilot, which allows hands-free operation of tractors and other farming equipment, thereby improving efficiency of the planting and cultivating process. The new system was recently introduced at the 2000 California Farm Equipment Show, and Genovese says customer feedback has been excellent. This gives us hope that when the product will enjoy a strong reception when it is rolled out in volume in the third quarter.
Trimble's business in the telecommunications market remains robust, Genovese added. Sales of telecom timing solutions (specifically the business with Nortel Networks Corp. (NYSE:NT - news) ) continue to be the principal driver in this segment. While it will be a challenge to replicate the 80% growth rate achieved last year, Genovese firmly believes the Timing and Synchronization division is poised to grow anywhere from 35% to 50% in 2000.
Many of our readers are probably familiar with Qualcomm Inc.'s recent foray into the GPS field. In January, the company spent $1 billion on a privately-held SnapTrack. We wanted to know Trimble's perspective on how this move affected the company's position in the market.
Genovese indicated that concerns of many that Qualcomm Inc. (NASDAQ:QCOM - news) , a new entrant in the GPS field, will eat Trimble for lunch are overblown. To begin with, SnapTrack, in which Qualcomm recently invested $1 billion, is primarily a software provider with a narrow focus on enhancing GPS reception indoors. In addition, SnapTrack's GPS know-how (a portfolio of approximately 50 patents) does not come close to that of Trimble (450 patents issued and pending).
Genovese also noted that, based on Trimble's extensive investigation, most wireless handset vendors are willing to pay no more than $0.10 to $0.15 per unit for the right to incorporate GPS into their products. Given the fact that there are 300 million cellular phones manufactured each year globally, the opportunity in the GPS-in-cell-phone market amounts to roughly $30 million to $45 million per year – a drop in a bucket for the crowded GPS sector.
Nevertheless, Trimble remains committed to this market. With the Epson/Seiko pure-licensing deal behind its belt, Trimble is looking to establish similar relationships in North America. Judging by management's conservatism in discussing the subject, we suspect that the company might be very close to reaching its objective.
Our conversation with CFO Genovese reaffirmed our positive outlook for Trimble in 2000. Continued strength in the land survey and commercial avionics business, the recovery in the construction and agricultural sectors, as well as potential new alliances in the telecom arena are the primary drivers of performance and stock price in the next 6 to 12 months.
At a recent $19.63, shares of Trimble represent a very attractive opportunity, trading at 19 times our fiscal 2000 earnings estimate of $1.04 per share. We encourage investors to take advantage of the recent weakness to open or add to their positions.
Updated February 11, 2000 with TRMB trading at $19.63
Recommended December 10, 1999 at $17.75
(The Magic 25 is a diversified portfolio of stocks that Individual Investor believes will outperform the market over the course of the year. In 1999, the Magic 25 portfolio was up 79.3%. On average the portfolio has risen 31.6% annually.)
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